Good day, and welcome to the ÅF AB second quarter financial report conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jonas Gustavsson, President and CEO of ÅF. Please go ahead, sir.
Thank you very much. Welcome to this presentation of the quarter two report of ÅF. My name is Jonas Gustavsson, and again, CEO of ÅF, and I am sitting here with Stefan Johansson, CFO. We will take you through the report and some slides that you have access to. For the agenda, we will cover the following topics, of course, a business overview. We will talk a bit on the market and some highlights, the financials, of course, and Stefan will take you through them. We will do a bit of a look into each of the divisions, a few words on the ongoing strategy implementation, and a summary. Starting with the overview of the quarter and also the half-year. You see the headline is that we have an increased profitability and also growth.
Looking on the quarter as such, we ended up at SEK 3.6 billion on the top line compared to SEK 3.2 billion one year ago, which was up 12%. The EBITDA ended up at SEK 366 million, equal to a margin of 10.2%, compared to 9.4%, one year ago. I would say that we think it is a strong quarter with an improved both top line and margin. If you look on the half-year as a result, we were up 8% on the top line, ended up at SEK 7 billion for the half-year and SEK 691 million on the EBITDA, which is 9.8% after six months.
Summary of the both quarter, I would say, and the first half-year is that we see an increased growth, improved both margin and profit, and, of course, the market I will get back to, but of course we are operating in an overall favorable market. I would say the energy markets is a bit sluggish still, but for most of the segment, it is a favorable market. At AF, we have a full focus on implementing our strategy in all our divisions. All over a quarter that we are happy with. We have still a lot more work to do of course, but it creates a good base for continued execution of the strategy and a continued focus on deliver profitable growth. I will get back a bit more to the details a bit later. We would like to highlight infrastructure.
We will do that, and the fact that we also have decent organic growth during the quarter. Just a few things about ÅF. I guess you will know, but we are now above 10,000 employees, 2017, SEK 13 billion in revenue. Of course, we are a strong Nordic company, but of course, with our current strategy, we also increase our share of international business, especially in the industry division. We have a lot of projects you see in more than 100 countries, most of them related to the energy business, but we step by step, I would say, see an increase of interesting, healthy, and good project in the industry division also outside the Nordic region. We are very selective when doing this to make sure that we get the profit and growth as we hope then. As ÅF, we are of course in a lot of different sectors.
I think one of the good things is that we have a natural hedge in our portfolio. Again, if you look on all of these sectors, I would say overall it's a good market. If I would highlight one of them, it is actually the one that is mentioned real estate here, which is a part of the infrastructure market. We call it buildings within ÅF, and that's a sector that we are doing very well. We're seeing good margin and a good growth in that sector. If you would ask us, we don't really see any sign of slowdown. Of course, we are focused very much on commercial building, highly advanced buildings in hospitals and airports and commercial buildings. Here we see a continued good underlying demand. Again, a good market. One third approximate is the public sector.
A lot of that comes, of course, from our infrastructure business, closest to 70% goes to private sectors. That's how we are set up. We are organized in four divisions as you know, infrastructure, industry, energy, and digital solutions, and below each of them, we have our business area. We have 21 business areas with clear P&L focus. Of course, each of them have a clear now strategy for how to improve their position. On top of that, we see an increased demand on cross-ÅF solutions, I would say. Of course, with the big trends we have, we also have them here on this slide, smart cities and infrastructure, future mobility, industrial digitalization, and also the new and changing end markets, we see an increased demand for cross-ÅF solutions.
If you look into a city now with all the challenges we have from urbanization and globalization and opportunities we see with digitalization, we see an increased demand of ÅF's competence. This is extremely interesting. We are getting more and more active in discussions, for example, related to smart or future cities then. To mention one interesting area, of course, all the activities around water in general in cities will be also an increased need for having competence in those areas. That's what I like with our company is that these trends are exactly right into the spot what ÅF is all about. They are helping us. A bit more on the market then in Q2. The overall market, as we said, is good, we see just minor variations compared to previous quarters. The market is still very strong.
Looking on industry and the industrial market, I would say it's strong in most sectors, both in Sweden, which is of course one of our strong markets, and of course the Nordic region, but also internationally. Again, within industry, we are stepping into more and more international assignments. As you all know, we have business in China related to automotive. We are now starting up business in South Africa related to a pulp and paper project. We see an increased demand for ÅF in some of these sectors then. Within infrastructure, we see a continued high rate of investment, again, within buildings, as I just talked about, but also in infrastructure in general. You might know that the Swedish National Transport Plan that was just presented indicates a continued high level of investment in general.
I think this is valid for Sweden, but also for the Nordic region then, of course, including Norway. The energy market then still is, as you know then, fragmented. Europe is still weak, and there are postponement done on investments in general. We have seen a slight increase in certain niches in Scandinavia than, and I would say especially in Sweden. Still work to do. Also, we'll get back to that for ÅF, but we see at least in Scandinavia that it's, I would say, stabilizing and some niches are picking up slightly then. Of course, the digitalization trends overall drive an increased demand for digital solutions in all markets.
Of course, in a quarter, we are assigning a lot of new projects, and I would say in general, the order pipeline is very good, and we see as, again, as a consequence of the strong market. These are just a few of the assignments that we have been signing during quarter two. We have an interesting hospital in Sweden, Gothenburg. We will do a lot of technical installation design. In Switzerland, we have several tunnel and industrial building projects. We have some interesting project in Denmark. We have taken a new order to Arla Foods, which is a turnkey project. We are in an interesting niche, and this shows again then that we have a very strong position in automotive related to autonomous cars. This is supporting a customer in California then.
Again, I have to say that ÅF have a very strong position into autonomous cars, and this is something that we find very interesting. We will deliver a complete production line to a battery manufacturer. We have some energy-related project in Finland as well in Asia, and we see an interest in increased need of floating solar plants. This is one in Asia, refurbishment of a hydropower plant in Sweden, and several digital-related projects within automotive. All over, I would say that the order pipeline for ÅF is as strong as ever. Looking on acquisitions, because obviously we are happy that at least, especially in infrastructure, we see a solid organic growth. Of course, we are stepping up in the acquisitions. As you know, we did a lot in 2016. 2017 was the year when we said two things. We are revising our strategy.
On top of that, we had the need to strengthen our balance sheet. Now we are gearing up the activities in the acquisitions because we have set a clear strategy direction, now we will make sure that the hunt for the company is fitting to the strategy. During quarter two, we did a few acquisitions, all of them ending up to an additional revenue of SEK 235 million, actually a few of them into the digital area, small ones in Sweden. We did one in Facilia, which is a nuclear waste management and decommissioning company. A small company, but has a really nice edge supporting exactly what we want to do in energy, really focusing on the niches where we see a continued and interesting growth. We have added on a company in building technology, electronic engineering in Sweden.
We acquired a small company in Norway related to digital. We actually presented yesterday, a company in Switzerland, LBP, which is focusing on electric engineering for traffic infrastructure that we also find very interesting. When you sum up this look on 2018 so far, in quarter one, we did two acquisitions, adding up to SEK 150 million additional revenue. Then with the ones that we just mentioned in quarter two, we are close to SEK 400 million additional revenue then. We are continuing to look, of course, for acquisitions. I think with this pace we have at the moment and the pipe that we have, I think we have the strong focus to end up and meet the 10% run rate growth that we have in our financial targets now. You see there are two unrelated to architecture and design.
Then we have these three one in digital solutions, building that we find very interesting and nuclear decommissioning. All of them, I would say, support the strategic plan that we have set for us. We feel happy with that. It also shows that four of them in Sweden and then Norway, Denmark and two in Switzerland, that we step by step build our base in our core countries as we have decided. Okay, with that, leave over to Stefan. A bit more on the numbers, starting with growth.
As Jonas has mentioned, we had a good growth in Q2 amounting to 11.7%. If we dig into the top-line numbers, we notice that the organic growth was 7.8%, which is up versus last year, both in terms of quarter and year-to-date numbers. If adjust for calendar effects and currency effects, the underlying growth was 5.1%, which gives a year-to-date number of 4.1%, which is up versus last year, which was at 2.5%, in which we have a 2.5% growth rate. We are working in a favorable market, especially in the infrastructure division. That division is the main driver for the growth. Since we do have some challenges in other divisions, we are focusing on activities in order to support future growth also in those areas, especially since the market is very good at the moment.
As we mentioned previous, we are growing also by acquisition 3.6% in the quarter, and we do see an increased prospect portfolio in the group. We are really driving acquisition growth combined with organic growth at the moment. In terms of profit, we reported an increase to SEK 366 million in the quarter, giving a margin of 10.2%, which is also a significant increase versus last year. The year-to-date numbers is 9.8% in margin versus 9.1% last year. You might notice that we included a disbursement received from a bankruptcy proceeding of SEK 18 million in the SEK 366 million. That item was posted under group-wide items. They have no effect on the individual divisions. There you can find the underlying growth. You can always discuss if this is a one-off item or not, which it of course is.
On the other hand, we have other items which also can be discussed as one-off item. I would claim that underlying profit is in the range between SEK 350 million and SEK 355 million for the group for the quarter. Cash flow. Once again, a stable cash flow. Cash flow from operation SEK 400 million. However, it was slightly below our expectations due to timing effect and calendar effects in projects. The cash flow was slightly negative in the month of June. We have been running at, if we look at working capital days, at an average of around 40 days until June, which implies a key ratio net working capital in relation to sales of 11%, which is the rate that we should be running at, which increased slightly during June. I expect the cash flow coming back in July and August.
Concerned of this effect in this month of June. Of course, acquisition and dividend had a negative impact on the net debt. We ended up in a SEK 2.8 billion net debt position for June, implying a net debt to EBITDA ratio of 2.2. That gives a very high capacity for future acquisitions. The capacity is roughly SEK 1 billion to support acquisition growth. We claim that we do have still a strong balance sheet, which will support our acquisition growth. All right.
Thank you, Stefan. Just short look in each of the divisions then starting with the infrastructure. Of course, we are proud and happy to see both strong growth and increased profitability in infrastructure. Again, we see the market is very good, but we also see that we are doing very well.
I would also claim that it's not just going on the strong market, I think, ÅF then that has over the last years, step by step, build a strong position in these infrastructure segments like building technology, I would call it, rail and road, as well as then niches like architecture that we actually, I would say, have acquired some of the best architects companies, and then looking into interesting niches like water and environment. We have a very good division with highly competent people. I would say that we are getting this operation better and better, and we are really set up for the, I would say, future infrastructure, including smart and future cities, as we talked about. We have, of course, booked some interesting orders both in Sweden and outside, as we mentioned before.
One bolt-on that we did in acquisition was Effekten, that was supporting the position on buildings in Sweden then. You see then again, the organic growth adjusted was up to 12% and an EBITDA of 11.4%. A very good and strong result from the infrastructure division. Industry division delivered a good profitability, I would say 9.4%, market generally very good. However, we have seen, which is of course, the focus right now on the industry division is growth. We have actually a negative growth when you adjust for calendar effect. We are becoming, I would say, quite selective on the industry division, what to do. We have a clear roadmap. Robert Larsson, who stepped in as new division president coming from ABB, is getting the team together and have a strong focus on the overall strategic repositioning to deliver more solutions and increase customer value.
We know the market very well in Sweden, Scandinavia, as well as internationally, we are step by step putting ÅF to become even more relevant to our industrial clients. We have booked some very interesting assignments to Arla Foods. Again, the whole automotive, I would say, market with disruptive trends like electrification and autonomous cars is very interesting for us. I'm sure the industry will deliver a good result moving forward. Of course, short term, there is a challenge to get people on board. There is a big need for engineers in Sweden, but also in Scandinavia. We know that, but we also believe that ÅF is a very interesting company to work on. I would say a good profit for industry, but we know that we need to step up on the growth side in industry.
Looking on energy, I would say the positive thing is that we see a stable profitability at the energy division, ending up at 6.6% in the quarter. We know that the market as such is still fragmented, with Europe being a bit sluggish. There are still postponement on a lot of investment projects. In some niches, we see some changes, for example, nuclear-related service decommissioning. We see some pickup, and also in some other areas, especially down in Scandinavia and in Sweden then. Also here, we are flat, I would say, on the top line, which I think if you go back a few years, we have been declining with a negative profit for quite some years. I think this is also in line with our strategy now, too. We have a stability.
Of course, we are now continuing our ambition to reposition the whole energy division because, of course, we know that we need to get back to growth, and we also know that we need to improve profit in this one. This is what it's all about, and the whole division is focused on making that happen. So far, to have a stability is something that we also are quite satisfied at the moment. Of course, moving forward, we have the fullest ambition to bring this back to growth and also to increase profit. Here we also mentioned during the quarter that Roberto Gerosa that's been divisional president for quite some years, has decided to leave the company.
We have an acting, Peter Plug, that's been working for ÅF for the last four years now, and he has, I would say, 10 years plus of experience from energy business. He is an international player, and I'm very confident Peter will, in the acting position he has done, be a perfect guy to continue to lead the strategic overlook and repositioning of energy division. That change we did communicate during the quarter. Finally, digital solutions. Here we deliver a stable profitability on just about 10% EBITDA and growth, I would say close to 5% organic growth in the quarter. We have been fighting here because also here, if it's any area where there's a big competition to get the best competent engineers, I would say this is one of them.
The whole digital disruptive that is going on that goes actually across all sectors. I would say, industry, but also if you look on the energy sector, even infrastructure, public sector, there's a huge need for digital competence, and this is a fantastic market, but at the same time, we are fighting to get the best competent people on board to ÅF. We are focusing a lot on recruitment activities to improve the organic growth. We have a lot of assignments in automotive, and we will continue to bolt on strategic important acquisitions to build the position of digital moving forward, because we believe at ÅF that the digital trend and the digital changes that we see will continue for a long time.
We really believe that ÅF, with the strong know-how on the industrial sectors, we can be more relevant than any others when it comes to implementing digital solutions. This you see the summary of Q2, and you know these numbers, but again, turned up and you see each of the division, and I think we have talked about all of that. There are some highlights, of course, with infrastructure, both in growth and EBIT, and the other ones are stable. We know that the industry has a challenge to get back on growth. Sum everything up, it's a good platform for driving continued profitable growth for ÅF. A few slides about the vision and the strategy, and I can tell you that the work internally in ÅF to execute the strategy is as high a pace as ever.
I'm very happy that we can do this repositioning change at the same time as we continue to deliver strong profit and financial performance. I'm very happy with that. Of course, this is our vision, providing leading solutions for generations to come, ÅF making future more relevant than ever, we believe. We see ourself as a company that creates sustainable engineering and design solution. Sustainability with digitalization, those two trends are extremely strong, and ÅF can be more relevant than any other company. That's my strong belief. You know also how we have decided to set up the strategic execution in ÅF. We are looking on growth as one pillar, the value creation, the operations, and people. Step by step, each of our business units are working in these different pillars how to improve.
Of course, this is something that takes some time, but we see interesting performance in many areas, and we will continue to implement that, of course, in the coming time then. The business model has been one discussion then in ÅF, and we see ourself as having two strong legs. One is the service offering we have, but also the fact that we are a company that is also delivering a lot of projects. The split is roughly 60/40, then 60% of the revenue goes out in the project area.
We are then again in discussions with each of our units, having clear processes how to improve value, but not the fact that you have to leave service and move all into project, because we can also increase the value creation to our clients also when it comes to service offering by not just delivering hours, we deliver professional teams. We are looking into the aftermarket because obviously when we have made a lot of installations into the industry and your infrastructure, there is interesting market and need from our clients to have an aftermarket support. Then we are also operating satellites to our clients. On the project, of course, we are then delivering both time and material project, but we are also involved in fixed price project and turnkey project.
The fixed price and turnkey we are doing to the clear clients that we know, for example, Volvo or other industrial clients. I think we have a good balanced risk profile at ÅF that we will move on. I'm extremely thrilled from the opportunity to have them in increasing the value creation, also moving into solution concept and even some signature products that will be complementary to our service and project offer. The strategy is implemented in a very structured way, and we have basically three ways that we have done, and we started this one during the fall then with the first one, then we have been talking and discussing a lot how to drive cross ÅF solutions and develop the business.
I mentioned one example is, for example, smart and future cities that we will be even more clear about in the coming period where we have a strong offer. Of course, we then implement structures and tools to our different units how we can leverage from the new organization, improving performance management, optimize incentive models, but also supporting also the local units with tools and processes to be able to execute the strategy. Still we have done some work, but as always, when you implement a strategy, it is the time that you do to really make it happen all the way out to the local units in all the countries that will make the difference.
I will claim that we still are in the beginning of a fantastic journey to take ÅF to the level where I think we can be even more relevant and to meet our financial targets. One thing I want to highlight, well, there's a lot of things, but one thing that I'm very proud of is that a few years ago, a couple of years ago, ÅF decided to start up a structure process to how to integrate and work with new immigrated engineers. I'm very proud of the fact that we have now more than 100 recruited new immigrated engineers at ÅF. We have two full-time diversity coaches that focus on that to hire these potentials and then support them within ÅF then. I would say this is a success story that has actually been discussed in Sweden in different areas then.
I'm very proud on that because it also gives a flavor of the values that we have in our company. We are a company that have 10,000 brave, devoted team players, and this is just one example where we do things that is a bit different, and we're very proud of that. We highlight quite often that one of the values, of course, is to be an attractive workplace, and ÅF has, over the last years, been ranked from Young Professional as top 3. Also this year, we're ranked as number 2 after IKEA and actually before Google then. We have a strong brand by Young Professionals. Just recently, there was a ranking coming out from scientific researchers. A question was asked to 600 researchers in Sweden, which company would you like to work for?
We are very proud to say that ÅF then was sharing the number 1 position together with ABB and AstraZeneca. If you just look on these two together then, First of all, we attract young professionals. On top of that, we are a company very relevant for researchers, meaning that the development and being able to have the most interesting technology in our company, these together builds a strong base for continue to drive organic growth and attract the best people then. Very proud of that. The financial targets you know, I will not repeat myself. We are going for growth, and as we mentioned, we have now after six months delivered a 4% organic growth, actually stepping up a bit in the Q2, still with the industry having the challenge.
We will continue to look for acquisitions, and of course, our target is to deliver or over-deliver on the 10%. On top of that, we are looking for platform acquisitions. This is a discussion that I have of course, finding out what kind of structural platform acquisition could we find then. EBITDA margin, we want to be, and we have said, 10% over a business cycle, and of course, with this favorable market, we should get there. This is something that is a big part of the strategy, and we are actually after six months at 9.8% then. This is something that we really have in front of us, and we are very dedicated to deliver this. It will take some time to get there, but I think we have a good base now.
As Stefan mentioned, we will end up at 2.2 as a net debt. That gives us the ammunition to continue to hunt for acquisition. Summarizing, these are the numbers we have talked about. We have delivered an improved profit margin, market is strong, and we see a general good demand. We have a strong focus on executing the strategy. In one way, I would say, of course, it's a quarter where we think it's a good base. I can tell you guys, it's not at all that we are satisfied, that we are resting. We know that we have a lot of work to do. Our ambitions are higher. We know that we need to beat the competition. We know that we need to deliver even stronger and better solutions to our customers.
It's a good base and a good step in the right direction, but it's far from over. We have a lot of more work to do and to make sure that we deliver and put ÅF where we really can be as a great company. With that, I think I will open up for questions.
Thank you, sir. If you would like to ask a question today, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will now take our first question from Predrag Savanovic from Nordea. Please go ahead, caller. Your line is open.
Thank you very much. I just had a question on pro solvendo; if you could talk a little bit more about what that is, and also on the other items that you, Stefan, mentioned that could be discussed as. I think you alluded to extra costs. What would that be in that case?
Okay. If we start with the bankruptcy proceeding, it is a very, very old receivable coming from an acquired company
That has nothing to do with the operations in ÅF. That is an old claim from an acquired company. When it comes to the other items, I will not go into that because you can always discuss what is a one-off item or not. We have different opinions on that. I will just try to guide you guys that we did have a positive one-off item, and of course, we have, in all companies, in all operations, items that could be discussed as having had a negative impact on the profit and loss. See my range of SEK 350-SEK 355 more as an indication for you to understand the underlying profit.
Okay. Thank you. Utilization is slightly down, margin is up. Does this mean that you are pushing through prices successfully? What is price and what is volume here?
If you look at the utilization rate, it is of course very important, but there are other items also important for us. Moving into projects means that we are taking a slight hit on the utilization rate since we need to spend more time on tenders and sales efforts. You can not translate the utilization rate directly to the profit and loss. Coming into price increase, yes, we are able to increase price increase. If you see the ratio between the cost for our employees versus the hourly charge we do, we are defending that gap. Even if we do have a kind of wage increase, we can put forward that to clients. In some specific areas, we are able to increase prices ahead of that gap. We are pushing prices at the moment.
At the same time, as we have mentioned, we are in some areas not positioned to push forward price increases due to competition. There are always companies, competition that are prepared to reduce prices or not to increase prices in relation to wage increases.
Just a comment from my side also here, and of course, what Stefan says, and I think the whole repositioning or development of ÅF means that utilization will always be one of the extremely important KPIs that we need to follow. Of course, as more hourly consultancy we do, that one is the only maybe relevant one then, of course. When we are moving more and more into the thing that we really talk about, how to deliver a project, a solution that really is value-driven for the customer, the pricing of that will be less on cost plus and more of the value to our clients. There we can see that we might invest a bit more in ahead, as Stefan says, in complex tenders, but the prices will be compensating for that.
Of course, that's kind of the change that we are just about to do. That means that we need basically to look on both KPIs. Of course, moving forward, we always need to make sure that we have a high utilization, but on top of that, become more and more relevant, and to make sure that we are differentiating ÅF versus local competition. What I think is coming a bit in the one year in the company is that ÅF with the size we have and the competence we have, we can do things that few others can do. This is exactly the trend we are doing, and what I'm happy with is that we can do this at the same time as we are delivering a solid financial performance.
Thank you very much for that. Just two more questions from my side. First, on market share. Are you taking market share now in the infra segment? Because in the comments you had in your presentation, it was as if you were alluding to this.
Well, not going into market share, it's always a difficult and challenging measure. What I can see, though, is that if I look on our building performance, I have to say I think we're doing very well, and I think especially on the fact that we are covering a strong local presence, not least in Sweden, but we also see outside Sweden. I can just say that I think the performance in that unit is very strong, and we see a strong growth. I would not like to maybe move into the exact discussion about market shares, because obviously, there is always different views how to measure it. I'm just looking at one of the areas where we really see that looking at, of course, there is a worry about private housing and the housing market in general.
What we see on the new commercial-driven buildings and the need of, I would say, renovate and replace some of them. When you look on hospitals, if you look on airports, if you look on shopping, complex buildings, I think these buildings start to be quite complex and most probably have been that for quite some time. It's easy to see the concrete and the structure of the building. When you look inside the building, when it comes to ventilation, electricity, security, fire alarms, et cetera. Also if you add on the connectivity part, the energy efficiency part, that will also be a strong driver. I think this is a place where ÅF will be able to be even more relevant, and I'm happy with the performance.
Of course, I will not maybe more about market shares, but I can assure you that we will continue to focus on that area.
That is very good. Thank you. Just the final one for me, industry is slightly slower here for Q2. Could you talk a bit about how you can turn this around for the coming quarters and years?
I think one factor is, of course, that the industry in Sweden, at least, has a super competitive market when it comes to hiring new engineers. If you look in Gothenburg as one region in Sweden with the whole automotive, they're going stronger than ever. There is a strong competition. At the same time, we are then driving, I would say, the repositioning of the industry, and these two factors have, of course, impacting us. I know that the industry division, we have the strongest focus on getting back to growth, organic growth, at the same time, setting the structure for really driving the business forward then. I'm not too worried. I think we will get back to growth in this division also.
It's all about now selecting and take the right orders and prioritize and get through with the price increases. I think we have a great base, and I'm not too worried moving forward, but it's a challenging competitive market when it comes to finding the best engineers, that's for sure.
Thank you very much.
Thank you.
As a reminder, again, if you would like to ask a question, please signal by pressing star one, and we will take our next question from Victor Lindberg. Please go ahead caller, your line is open.
Thank you. Some questions were answered already, maybe you can add on by elaborating a bit about your Chinese venture, both how sizable is it right now in terms of employees, revenue? Is it generating a surplus on bottom line, et cetera? These engineers, are they only working locally, or can you source competence from China to the Nordics in any way or vice versa? Just an update on China would be interesting.
Thank you, Victor. Good question. First of all, China is interesting for us, we have decided to move into China than to set up a small office related to automotive a couple of years ago, we are leveraging from that. Of course, this means that we have people on site interacting with the customers, volume-wise, a lot of the kind of production of detailed drawings and is done in Sweden with Trollhättan as a strong base. Of course, since we acquired the former basically Saab engineer team in Trollhättan. We have a fantastic high-end capability in automotive. Looking on China, as a market, I would say that me personally, I've been there for so many times in my old company, Sandvik.
If you look at Robert Larsson now, who came into driving industry, he's been living in Shanghai for two, three years working for ABB. I think China is a highly relevant market for us. Right now we are looking into China not only for automotive. How can we with this not super big base at the moment leverage moving forward then? We are actually right now looking into China for other industries also then, when it comes to industrial areas. We don't have the biggest business in China if you look on the pure people on site. We are step by step building the capability presence both in industry, but also other relevant sectors. It will take some time, of course, before we have a big operation in China.
I can tell you the competence level we have for Chinese customers is more relevant than others. If you go back a few years, the Chinese, they wanted to kind of understand how to make the products that was maybe done in the western part of the world. I think they are very interested now is, of course, the engineering knowledge that we have then. For example, I can give you one example, advanced manufacturing. We have a fantastic niche in delivering state-of-the-art manufacturing systems actually. Robotized, automated systems, a lot to automotive industry. We are very strong in Sweden to automotive industry, and this is something where we see a big interesting need in China then when it comes to advanced manufacturing systems supporting the big demand in manufacturing in China. You said about using China for maybe pulling back engineering.
I'm not sure that China is the best place. It's not really a low-cost country anymore. There are other areas that we for sure are looking into for us, because that's one of the areas that we will look deeper into how to establish strong offshore sourcing bases for supporting growth. I'm not sure that China is the one. I think China will support China. That's what we see in all the industrial companies that 20 years ago you thought maybe a bit like you could use China for other parts. Now I think most of the company uses China for China because the Chinese market is huge. This was a long answer, Victor, to your question, maybe not even on exactly what you wanted to have, because I will not disclose how big we are, but it becomes more and relevant for us.
Thank you for the answer. Are you using predominantly local skills in China or are you sending Nordic competence?
We are building up local more and more, but of course, we have a few selective on-site for more of them. Moving forward, it's absolutely clear that you have to build up your local presence with local people now. We are looking for step-by-step, adding on local presence who really knows, understands the Chinese market, and not least speak the language. As you know, there's basically two sides of companies in China, state-owned, huge volume, and then the private companies. The private companies are quite often Western part companies. All the big automotive players have big factories in China. There's a huge volume of state-owned company, and to understand them, you need to have really Chinese local people then who now have the context.
If you ask Wuhan now with Robert Larsson, who's been living in Shanghai, has a tremendous good experience from the Chinese market. I feel confident that we will step-by-step be even more relevant in China. Going back a few years, China is far away from a distance point of view, but it is in a way as close as any European countries because the market is huge, and it is interesting. I will not oversell it to you guys because it will take time, but we discuss China in the West now more and more frequent.
Okay. That's good. Thank you so much for the update.
Thank you.
Good luck with Q3.
Yeah, thank you.
As a final reminder, if you would like to ask a question, please press star one. It appears there are no further questions at this time, I'd like to hand the call back over to you, Jonas, for any additional or closing remarks.
All right. I would like to thank all of you for listening this hour. Again, to summarize, we have created a good base, but I can tell you we are extremely motivated to continue to execute our strategy. I would like to say thank you, and I would like to wish all of you a great summer, and looking forward to meeting you soon again. Thank you very much.
Ladies and gentlemen, this concludes today's call. Thank you all for your participation. You may now disconnect.